Nov 3, 2009

One of the trends I’ve been keeping my eye on is the speed at which we seem to be headed towards a two-tier system of media consumption, with commercial free content available for those willing (and able) to pay for it, and ad-supported content for those who are not.

It’s a trend that’s mirrored in other industries, from health care (many doctors in affluent areas no longer take insurance: they have enough patients who are willing to pay out of pocket and take whatever “out of network” reimbursement they can get in return for what they regard as a superior, more patient-centric experience) to the airline industry, where the difference between first class and steerage seemingly grows more pronounced with each passing month.

Media is ripe for this sort of bifurcation as there is a large pool of people who’ll gladly pay to avoid commercials of any sort. For as much as we protest that people “read what interests them” and “find value in well-targeted messaging,” the truth is that commercials are inherently interruptive and that if one is truly engaged in whatever content one is consuming (e.g. if you’re really enjoying that episode of Mad Men) they’re about as welcome as the Spanish Inquisition.

No matter how well-targeted or interesting.

As I noted the other week, once we’ve sipped from the commercial-and-preview-free fountain of iTunes, it’s hard to go back to watching anything else. And while the $2.99 it now costs to buy an HD iTunes episode is pretty cheap, I suspect the networks could get away with charging several times that amount and still find takers who’ll pay a premium for the enhanced experience. (Not to mention the bragging rights.) Apple is allegedly already looking for takers for an iTunes monthly subscription service and Hulu, Google (YouTube) and even Netflix are all allegedly looking at similar models.

Given that scenario and the continued reliance upon the ad-supported model for “free”-- it’s easy to see a two-tiered system evolving for many of the more popular platforms.

It’s not much of a stretch to see either Twitter or Facebook introducing ad-free subscription models (e.g. pay $10/month and you’ll get no ads and some enhanced features while free users will start seeing more and more prominently placed ads.)

That system is already in place for mobile apps, many of which come in two flavors: a free version with ads and a paid version that’s ad-free and comes with a few more bells and whistles.

The two-tier system is not necessarily a bad thing though, except, perhaps, to those trying to market Range Rovers and Rolexes. It allows people to place a value on content according to how important it is to them: I may consent to watch commercials during a show I’m not all that interested in (which would probably increase the likelihood that I’d pay attention to the commercials) but pay to be able to watch a show I do like with no interruptions.

I’d say it’s inherently classist, but the low cost of entry makes it an affordably luxury for most people. If not all the time, then certainly on enough occasions as to make the scenario seem equitable.

As such, I can see the two tier system spreading beyond what we now think of as ad-supported media: cell phone service could be made to work this way: pay a greatly reduced price (or nothing at all) to have ads continuously streaming across your screen or pay more to avoid them. Popular media blogger Ben Kunz has even suggested an advertising model for books that I can see working both for library books and/or for books the reader views as disposable.

The trick here-- across the board-- is going to be striking a balance between what the market will bear and what the provider needs to earn. That’s an equation that’s going to have to be figured out on the fly and there are sure to be some casualties along the way. The end result though will be a system that ultimately gives the consumer more control and makes advertising of all sorts less onerous.

One of the trends I’ve been keeping my eye on is the speed at which we seem to be headed towards a two-tier system of media consumption, with commercial free content available for those willing (and able) to pay for it, and ad-supported content for those who are not.

It’s a trend that’s mirrored in other industries, from health care (many doctors in affluent areas no longer take insurance: they have enough patients who are willing to pay out of pocket and take whatever “out of network” reimbursement they can get in return for what they regard as a superior, more patient-centric experience) to the airline industry, where the difference between first class and steerage seemingly grows more pronounced with each passing month.

Media is ripe for this sort of bifurcation as there is a large pool of people who’ll gladly pay to avoid commercials of any sort. For as much as we protest that people “read what interests them” and “find value in well-targeted messaging,” the truth is that commercials are inherently interruptive and that if one is truly engaged in whatever content one is consuming (e.g. if you’re really enjoying that episode of Mad Men) they’re about as welcome as the Spanish Inquisition.

No matter how well-targeted or interesting.

As I noted the other week, once we’ve sipped from the commercial-and-preview-free fountain of iTunes, it’s hard to go back to watching anything else. And while the $2.99 it now costs to buy an HD iTunes episode is pretty cheap, I suspect the networks could get away with charging several times that amount and still find takers who’ll pay a premium for the enhanced experience. (Not to mention the bragging rights.) Apple is allegedly already looking for takers for an iTunes monthly subscription service and Hulu, Google (YouTube) and even Netflix are all allegedly looking at similar models.

Given that scenario and the continued reliance upon the ad-supported model for “free”-- it’s easy to see a two-tiered system evolving for many of the more popular platforms.

It’s not much of a stretch to see either Twitter or Facebook introducing ad-free subscription models (e.g. pay $10/month and you’ll get no ads and some enhanced features while free users will start seeing more and more prominently placed ads.)

That system is already in place for mobile apps, many of which come in two flavors: a free version with ads and a paid version that’s ad-free and comes with a few more bells and whistles.

The two-tier system is not necessarily a bad thing though, except, perhaps, to those trying to market Range Rovers and Rolexes. It allows people to place a value on content according to how important it is to them: I may consent to watch commercials during a show I’m not all that interested in (which would probably increase the likelihood that I’d pay attention to the commercials) but pay to be able to watch a show I do like with no interruptions.

I’d say it’s inherently classist, but the low cost of entry makes it an affordably luxury for most people. If not all the time, then certainly on enough occasions as to make the scenario seem equitable.

As such, I can see the two tier system spreading beyond what we now think of as ad-supported media: cell phone service could be made to work this way: pay a greatly reduced price (or nothing at all) to have ads continuously streaming across your screen or pay more to avoid them. Popular media blogger Ben Kunz has even suggested an advertising model for books that I can see working both for library books and/or for books the reader views as disposable.

The trick here-- across the board-- is going to be striking a balance between what the market will bear and what the provider needs to earn. That’s an equation that’s going to have to be figured out on the fly and there are sure to be some casualties along the way. The end result though will be a system that ultimately gives the consumer more control and makes advertising of all sorts less onerous.